Retirement Age Rules about to Change?

29th January 2010

Retirement Age Rules about to Change?

The Current Law

Currently a worker in the United Kingdom can see their employment end at the age of 65 (the default retirement age) without any redundancy payment, even if they do not wish to retire. In essence all that an employer needs to do is serve the employee with 6 months’ notice and follow a fairly limited procedure.

In a high profile case last year, known as the Heyday Challenge, the High Court did rule that the default retirement age of 65 introduced by the Government in 2006 did comply with an EC Directive against age discrimination. However Mr Justice Blake did say that there was a “compelling case” for changing the law.

The Government Push for Change

Recently the Equalities Minister, Harriett Harman, signalled an intention from the Government to change the law to enable people to work beyond the age of 65. She also stated that it was the intention of the Government to push the law through as soon as possible. It is believed that currently an Equalities Bill is before the House of Lords for its consideration.

Whether or not the Government is able to change the law in the near future, bearing in mind the forthcoming General Election, remains to be seen. If it does then the default retirement age may be increased to say 68 or above, or possibly even be removed completely.

Reasons for Change

It is felt by many that the default retirement age is arbitrary and bears no real relation to people’s ability. Many workers are remaining active and healthy well into their older years.

Furthermore many workers feel the need to continue to work in order to combat the effects of the recession and due to the fact that many pensions are insufficient.

It is believed that the Government supports a change in the law since it will help to reduce welfare costs, and will bring about increased spending power amongst older generations. It is also believed that it will keep more skilled people in work for longer, which can only benefit the economy.

The proposed law changes have recently received backing from the Federation of Small Businesses and the Equality and Human Rights Commission.

On the other hand many employers are opposed to such changes. They fear a string of compensation cases to be bought by people who do not want to retire. They feel that there are already adequate rules in place. For example, under current law, employees do have the right to request to continue to work beyond their default retirement age (or the date when the employer wants them to retire). The employer can refuse the request though, and the law does not require them to give any reason for that decision.

“Obviously it is not known with any certainty whether or not this Government will push through the law changes, bearing in mind that there is a General Election in the pipeline.

Until any proposed changes are turned into legislation, I would suggest that employers continue to follow the current law. Namely if they have an employee that is aged 65 or over, they can (if they so wish) look to retire that employee by following current procedures including the provision of 6 months notice.

However employers should be aware that if law changes do take place prior to the end of the 6 months’ notice that has to be given, it may be that the notice will become void and the new rules will be applicable.

I do think it is inevitable that at some stage the default retirement age will either be increased, or removed completely. However with the political uncertainty of a General Election, it is uncertain as to when such changes will be implemented.”

Maples are following this matter carefully, and will report further as and when there are any developments. Please log onto our website for any updates.

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